Exhibit 99.1
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For Immediate Release
Media Relations Contacts:
Ms. Mary De La Garza
mary.delagarza@idearc.com
972-453-7016
or
Ms. Jannie Luong
jannie.luong@idearc.com
972-453-3916
Ms. Mary De La Garza
mary.delagarza@idearc.com
972-453-7016
or
Ms. Jannie Luong
jannie.luong@idearc.com
972-453-3916
Investor Relations Contact:
Mr. Samuel D. (Dee) Jones
dee.jones@idearc.com
972-453-7364
Mr. Samuel D. (Dee) Jones
dee.jones@idearc.com
972-453-7364
IDEARC ANNOUNCES FIRST QUARTER 2008 RESULTS
DALLAS– May 6, 2008 – Idearc Inc. (NYSE: IAR) today announced financial results for the quarter ended March 31, 2008.
Frank Gatto, the Company’s acting chief executive officer, said, “The set of assets that make this business an attractive investment are still in place and the business fundamentals are still sound and solid. The economic softness that began in the latter half of 2007 continues to impact our results and, while the first quarter proved to be challenging, we remain committed to our multi-product strategy, which we believe will ultimately maximize value to our investors.”
Financial Summary
Idearc reports financial results on a GAAP basis and on an adjusted pro forma basis to eliminate the impact of transition and certain non-recurring costs. The adjusted pro forma basis measures are described and are reconciled to the corresponding GAAP measures in the accompanying financial schedules.
The Company reported first-quarter 2008 multi-product revenues of $770 million, a decrease of 4.5 percent compared to the same period in 2007. The Company reported Internet revenue of $73 million in the first quarter, a 7.4 percent increase over the same period in 2007.
Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter 2008 were $359 million, up 1.4 percent compared to the same period in 2007. On an adjusted pro forma basis, first-quarter EBITDA was $367 million, a decrease of 3.2 percent compared to the same period in 2007. Adjusted pro forma EBITDA margins reflected a slight increase at 47.7 percent in the first quarter 2008, compared to 47.0 percent in the same period in 2007.
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Net income was $111 million (an increase of 7.8 percent versus the same period in 2007), or 76 cents per diluted share, for the first quarter 2008. On an adjusted pro forma basis, first-quarter net income was $116 million (a decrease of 2.5 percent versus the same period in 2007), or 79 cents per diluted share.
Free cash flow for the period was $193 million based on cash from operating activities of $202 million, less capital expenditures of $9 million.
Multi-product advertising sales for the first quarter declined 6.2 percent compared to 2007.
Webcast Information
Idearc welcomes investors, media and other interested parties to join Frank Gatto, Idearc acting CEO, and Samuel D. (Dee) Jones, acting chief financial officer, in a discussion via a webcast and teleconference beginning today at 10:00 a.m. (Eastern). Individuals within the United States can access the earnings call by dialing 888-603-6873. International participants should dial 973-582-2706. The pass code for the call is: 42201312. In order to ensure a prompt start time, please dial in to the call by 9:50 a.m. (Eastern). A replay of the teleconference will be available at 800-642-1687. International callers can access the replay by calling 706-645-9291. The replay pass code is 42201312. The replay will be available through May 20. In addition, a live webcast will be available on Idearc’s Web site at www.idearc.com, under the Investor Relations tab.
Certain statements included in this press release and the hyperlinked materials constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Idearc management’s current views with respect to Idearc’s financial performance and future events with respect to its business and industry in general. Statements that include the words “believe,” “anticipate,” “foresee,” and similar expressions identify forward-looking statements. Idearc cautions you not to place undue reliance on these forward-looking statements. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: (i) risks related to Idearc’s substantial indebtedness; (ii) risks related to Idearc’s declining print revenue; (iii) limitations on Idearc’s operating and strategic flexibility under the terms of its debt agreements; (iv) changes in Idearc’s competitive position due to competition from other yellow pages directories publishers and other traditional and new media and its ability to anticipate or respond to changes in technology and user preferences; (v) declining use of print yellow pages directories; (vi) access to capital markets and changes in credit ratings; (vii) changes in the availability and cost of paper and other raw materials used to print directories and reliance on third-party printers and distributors; (viii) increased credit risk associated with reliance on small- and medium-sized businesses; (ix) changes in operating performance; (x) increased demands on management as a result of operating as an independent company; (xi) Idearc’s ability to attract and retain qualified executives; (xii) Idearc’s ability to maintain good relations with its unionized employees; (xiii) changes in U.S. labor, business, political and/or economic conditions; (xiv) changes in governmental regulations and policies and actions of regulatory bodies; (xv) risks inherent in Idearc’s spin-off from its former parent corporation, Verizon Communications Inc., including increased costs and reduced profitability associated with operating as an independent company; and (xvi) risks associated with Idearc’s obligations under agreements entered into with Verizon in connection with the spin-off. For a discussion of these and other risks and uncertainties, see Idearc Inc.’s periodic filings with the Securities and Exchange Commission, which you may view at www.sec.gov, and in particular, Idearc Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007.
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IDEARC INC.
Consolidated Statements of Income
Consolidated Statements of Income
Reported (GAAP)
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
(dollars in millions, except per share amounts)
3 Mos. Ended | 3 Mos. Ended | |||||||||||
Unaudited | 3/31/08 | 3/31/07 | % Change | |||||||||
Operating Revenue | ||||||||||||
Print products | $ | 696 | $ | 737 | (5.6 | ) | ||||||
Internet | 73 | 68 | 7.4 | |||||||||
Other | 1 | 1 | — | |||||||||
Total Operating Revenue | 770 | 806 | (4.5 | ) | ||||||||
Operating Expense | ||||||||||||
Selling | 185 | 188 | (1.6 | ) | ||||||||
Cost of sales (exclusive of depreciation and amortization) | 147 | 158 | (7.0 | ) | ||||||||
General and administrative | 79 | 106 | (25.5 | ) | ||||||||
Depreciation and amortization | 20 | 22 | (9.1 | ) | ||||||||
Total Operating Expense | 431 | 474 | (9.1 | ) | ||||||||
Operating Income | 339 | 332 | 2.1 | |||||||||
Interest expense, net | 166 | 170 | (2.4 | ) | ||||||||
Income Before Provision for Income Taxes | 173 | 162 | 6.8 | |||||||||
Provision for income taxes | 62 | 59 | 5.1 | |||||||||
Net Income | $ | 111 | $ | 103 | 7.8 | |||||||
Basic and Diluted Earnings per Common Share(1) | $ | .76 | $ | .70 | 8.6 | |||||||
Basic and diluted weighted-average common shares outstanding (in millions) | 146 | 146 | ||||||||||
Dividends Declared per Common Share | $ | .3425 | $ | .3425 |
Prior period amounts presented above and in the following schedules have been reclassified to conform to current year presentation. | ||
Note: | ||
(1) | Restricted stock awards granted in 2007 had no material impact on the calculation of diluted earnings per common share. |
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IDEARC INC.
Consolidated Statements of Income
Consolidated Statements of Income
Adjusted Pro Forma (Non-GAAP)(1)
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
(dollars in millions, except per share amounts)
3 Mos. Ended | 3 Mos. Ended | |||||||||||
Unaudited | 3/31/08 | 3/31/07 | % Change | |||||||||
Operating Revenue | ||||||||||||
Print products | $ | 696 | $ | 737 | (5.6 | ) | ||||||
Internet | 73 | 68 | 7.4 | |||||||||
Other | 1 | 1 | — | |||||||||
Total Operating Revenue | 770 | 806 | (4.5 | ) | ||||||||
Operating Expense | ||||||||||||
Selling | 185 | 188 | (1.6 | ) | ||||||||
Cost of sales (exclusive of depreciation and amortization) | 147 | 158 | (7.0 | ) | ||||||||
General and administrative | 71 | 81 | (12.3 | ) | ||||||||
Depreciation and amortization | 20 | 22 | (9.1 | ) | ||||||||
Total Operating Expense | 423 | 449 | (5.8 | ) | ||||||||
Operating Income | 347 | 357 | (2.8 | ) | ||||||||
Interest expense, net | 166 | 170 | (2.4 | ) | ||||||||
Income Before Provision for Income Taxes | 181 | 187 | (3.2 | ) | ||||||||
Provision for income taxes | 65 | 68 | (4.4 | ) | ||||||||
Net Income | $ | 116 | $ | 119 | (2.5 | ) | ||||||
Basic and Diluted Earnings per Common Share(2) | $ | .79 | $ | .82 | (3.7 | ) | ||||||
Basic and diluted weighted-average common shares outstanding (in millions) | 146 | 146 |
Notes: | ||
(1) | These consolidated statements of income provide a comparison of the three months ended March 31, 2008 adjusted pro forma results to the three months ended March 31, 2007 adjusted pro forma results. The following schedules provide reconciliations from our reported GAAP results to adjusted pro forma non-GAAP results for the periods shown above. | |
(2) | Restricted stock awards granted in 2007 had no material impact on the calculation of diluted earnings per common share. |
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IDEARC INC.
Consolidated Statements of Income
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted Pro Forma (Non-GAAP)
Three Months Ended March 31, 2008
Three Months Ended March 31, 2008
(dollars in millions, except per share amounts)
Transition Costs | ||||||||||||||||
3 Mos. Ended | 3 Mos. Ended | |||||||||||||||
3/31/08 | 3/31/08 | |||||||||||||||
Adjusted | ||||||||||||||||
Reported | Stock-Based | Separation | Pro Forma | |||||||||||||
Unaudited | (GAAP) | Compensation(3) | Costs(4) | (Non-GAAP) | ||||||||||||
Operating Revenue | ||||||||||||||||
Print products | $ | 696 | $ | — | $ | — | $ | 696 | ||||||||
Internet | 73 | — | — | 73 | ||||||||||||
Other | 1 | — | — | 1 | ||||||||||||
Total Operating Revenue | 770 | — | — | 770 | ||||||||||||
Operating Expense | ||||||||||||||||
Selling | 185 | — | — | 185 | ||||||||||||
Cost of sales (exclusive of depreciation and amortization) | 147 | — | — | 147 | ||||||||||||
General and administrative | 79 | (1 | ) | (7 | ) | 71 | ||||||||||
Depreciation and amortization | 20 | — | — | 20 | ||||||||||||
Total Operating Expense | 431 | (1 | ) | (7 | ) | 423 | ||||||||||
Operating Income | 339 | 1 | 7 | 347 | ||||||||||||
Interest expense, net | 166 | — | — | 166 | ||||||||||||
Income Before Provision for Income Taxes | 173 | 1 | 7 | 181 | ||||||||||||
Provision for income taxes | 62 | — | 3 | 65 | ||||||||||||
Net Income | $ | 111 | $ | 1 | $ | 4 | $ | 116 | ||||||||
Basic and Diluted Earnings per Common Share | $ | .76 | $ | .01 | $ | .03 | $ | .79 | ||||||||
Operating Income | $ | 339 | $ | 1 | $ | 7 | $ | 347 | ||||||||
Depreciation and Amortization | 20 | — | — | 20 | ||||||||||||
EBITDA (non-GAAP)(1) | $ | 359 | $ | 1 | $ | 7 | $ | 367 | ||||||||
Operating Income margin(2) | 44.0 | % | 45.1 | % | ||||||||||||
Impact of depreciation and amortization | 2.6 | % | 2.6 | % | ||||||||||||
EBITDA margin (non-GAAP)(1) | 46.6 | % | 47.7 | % | ||||||||||||
Notes: | ||
(1) | EBITDA is a non-GAAP measure that represents earnings before interest, taxes, depreciation, and amortization. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by total operating revenue. | |
(2) | Operating income margin is calculated by dividing operating income by total operating revenue. | |
(3) | The stock-based compensation costs relate to a one-time incentive compensation award granted to most of the Company’s employees in January 2007. | |
(4) | Separation costs are costs associated with becoming a stand-alone entity as a result of the spin-off from Verizon. |
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IDEARC INC.
Consolidated Statements of Income
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted Pro Forma (Non-GAAP)
Three Months Ended March 31, 2007
Three Months Ended March 31, 2007
(dollars in millions, except per share amounts)
Transition Costs | ||||||||||||||||
3 Mos. Ended | 3 Mos. Ended | |||||||||||||||
3/31/07 | 3/31/07 | |||||||||||||||
Adjusted | ||||||||||||||||
Reported | Stock-Based | Separation | Pro Forma | |||||||||||||
Unaudited | (GAAP) | Compensation(3) | Costs(4) | (Non-GAAP) | ||||||||||||
Operating Revenue | ||||||||||||||||
Print products | $ | 737 | $ | — | $ | — | $ | 737 | ||||||||
Internet | 68 | — | — | 68 | ||||||||||||
Other | 1 | — | — | 1 | ||||||||||||
Total Operating Revenue | 806 | — | — | 806 | ||||||||||||
Operating Expense | ||||||||||||||||
Selling | 188 | — | — | 188 | ||||||||||||
Cost of sales (exclusive of depreciation and amortization) | 158 | — | — | 158 | ||||||||||||
General and administrative | 106 | (9 | ) | (16 | ) | 81 | ||||||||||
Depreciation and amortization | 22 | — | — | 22 | ||||||||||||
Total Operating Expense | 474 | (9 | ) | (16 | ) | 449 | ||||||||||
Operating Income | 332 | 9 | 16 | 357 | ||||||||||||
Interest expense, net | 170 | — | — | 170 | ||||||||||||
Income Before Provision for Income Taxes | 162 | 9 | 16 | 187 | ||||||||||||
Provision for income taxes | 59 | 3 | 6 | 68 | ||||||||||||
Net Income | $ | 103 | $ | 6 | $ | 10 | $ | 119 | ||||||||
Basic and Diluted Earnings per Common Share | $ | .70 | $ | .04 | $ | .07 | $ | .82 | ||||||||
Operating Income | $ | 332 | $ | 9 | $ | 16 | $ | 357 | ||||||||
Depreciation and Amortization | 22 | — | — | 22 | ||||||||||||
EBITDA (non-GAAP)(1) | $ | 354 | $ | 9 | $ | 16 | $ | 379 | ||||||||
Operating Income margin(2) | 41.2 | % | 44.3 | % | ||||||||||||
Impact of depreciation and amortization | 2.7 | % | 2.7 | % | ||||||||||||
EBITDA margin (non-GAAP)(1) | 43.9 | % | 47.0 | % | ||||||||||||
Notes: | ||
(1) | EBITDA is a non-GAAP measure that represents earnings before interest, taxes, depreciation, and amortization. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by total operating revenue. | |
(2) | Operating income margin is calculated by dividing operating income by total operating revenue. | |
(3) | The stock-based compensation costs relate to a one-time incentive compensation award granted to most of the Company’s employees in January 2007. | |
(4) | Separation costs are costs associated with becoming a stand-alone entity as a result of the spin-off from Verizon. |
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IDEARC INC.
Consolidated Balance Sheets
Consolidated Balance Sheets
Reported (GAAP)
As of March 31, 2008 and December 31, 2007
As of March 31, 2008 and December 31, 2007
(dollars in millions)
Unaudited | 3/31/2008 | 12/31/2007 | ||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 179 | $ | 48 | ||||
Accounts receivable, net of allowances of $85 and $77 | 414 | 423 | ||||||
Deferred directory costs | 311 | 312 | ||||||
Prepaid expenses and other | 7 | 10 | ||||||
Total current assets | 911 | 793 | ||||||
Property, plant and equipment | 473 | 471 | ||||||
Less: accumulated depreciation | 364 | 356 | ||||||
109 | 115 | |||||||
Goodwill | 73 | 73 | ||||||
Intangible assets, net | 298 | 303 | ||||||
Pension assets | 174 | 171 | ||||||
Non-current deferred tax assets | 166 | 124 | ||||||
Debt issuance costs | 84 | 86 | ||||||
Other noncurrent assets | 2 | 2 | ||||||
Total Assets | $ | 1,817 | $ | 1,667 | ||||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 340 | $ | 272 | ||||
Deferred revenue | 209 | 209 | ||||||
Current maturities of long-term debt | 67 | 48 | ||||||
Current deferred taxes | 24 | 28 | ||||||
Other | 28 | 31 | ||||||
Total current liabilities | 668 | 588 | ||||||
Long-term debt | 8,989 | 9,020 | ||||||
Employee benefit obligations | 321 | 327 | ||||||
Unrecognized tax benefits | 107 | 109 | ||||||
Other liabilities | 360 | 223 | ||||||
Stockholders’ equity (deficit): | ||||||||
Common stock ($.01 par value; 225 million shares authorized, 146,527,395 and 146,795,971 shares issued and outstanding in 2008 and 2007, respectively) | 1 | 1 | ||||||
Additional paid-in capital (deficit) | (8,775 | ) | (8,776 | ) | ||||
Retained earnings | 422 | 361 | ||||||
Accumulated other comprehensive loss | (276 | ) | (186 | ) | ||||
Total stockholders’ equity (deficit) | (8,628 | ) | (8,600 | ) | ||||
Total Liabilities and Stockholders’ Equity (Deficit) | $ | 1,817 | $ | 1,667 | ||||
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IDEARC INC.
Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
Reported (GAAP)
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
(dollars in millions)
3 Months Ended | 3 Months Ended | |||||||
Unaudited | 3/31/08 | 3/31/07 | ||||||
Cash Flows from Operating Activities | ||||||||
Net Income | $ | 111 | $ | 103 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 20 | 22 | ||||||
Employee retirement benefits | 2 | 5 | ||||||
Deferred income taxes | 2 | (1 | ) | |||||
Provision for uncollectible accounts | 39 | 32 | ||||||
Stock-based compensation | (5 | ) | 12 | |||||
Changes in current assets and liabilities | ||||||||
Accounts receivable | (30 | ) | (84 | ) | ||||
Deferred directory costs | 1 | (15 | ) | |||||
Other current assets | 4 | (1 | ) | |||||
Accounts payable and accrued liabilities | 63 | 133 | ||||||
Other, net | (5 | ) | (5 | ) | ||||
Net cash provided by operating activities | 202 | 201 | ||||||
Cash Flows from Investing Activities | ||||||||
Capital expenditures (including capitalized software) | (9 | ) | (10 | ) | ||||
Net cash used in investing activities | (9 | ) | (10 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Repayment of long-term debt | (12 | ) | (12 | ) | ||||
Dividends paid to Idearc stockholders | (50 | ) | (50 | ) | ||||
Net cash used in financing activities | (62 | ) | (62 | ) | ||||
Increase in cash and cash equivalents | 131 | 129 | ||||||
Cash and cash equivalents, beginning of year | 48 | 172 | ||||||
Cash and cash equivalents, end of period | $ | 179 | $ | 301 | ||||
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IDEARC INC.
Mutli-Product Advertising Sales
Mutli-Product Advertising Sales
(dollars in millions)
3 Mos. Ended | 3 Mos. Ended | 3 Mos. Ended | ||||||||||
Unaudited | 3/31/08 | 3/31/07 | 3/31/06 | |||||||||
Net Print Products Revenue(1) | $ | 652 | $ | 705 | $ | 722 | ||||||
% Change year-over-year | (7.5 | )% | (2.4 | )% | ||||||||
Net Internet Revenue(2) | 73 | 68 | 52 | |||||||||
% Change year-over-year | 7.4 | % | 30.8 | % | ||||||||
Net Multi-Product Advertising Sales(3) | 725 | 773 | 774 | |||||||||
% Change year-over-year | (6.2 | )% | (0.1 | )% | ||||||||
Notes: | ||
(1) | Net print products revenue represents the total revenue value (less a provision for sales allowances) of directories published that will be amortized over the life of the directories, which is typically 12 months. Directories from preceding periods have been aligned to match the publication schedule of 2008 publications, allowing for a meaningful comparison of current publications to previous publications. | |
(2) | Net Internet revenue represents total revenue for our fixed-fee and performance-based advertising products less a provision for sales allowances. Fixed-fee advertising includes advertisement placement on our Superpages.com website, and website development and hosting for our advertisers. Revenue from fixed-fee advertisers is recognized monthly over the life of the advertising service. Performance-based advertising revenue is earned when consumers connect with our Superpages.com advertisers by a “click” on their Internet advertising or a phone call to their business. Revenue from performance-based advertising is recognized when there is evidence that qualifying transactions have occurred. | |
(3) | Net multi-product advertising sales is a statistical measure. It is important to distinguish net multi-product advertising sales from total operating revenue, which on our financial statements is recognized under the deferral and amortization method. |
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About Idearc Inc.
Idearc Inc. (NYSE: IAR) delivers products on multiple platforms to help consumers find the information they want, wherever they are. Idearc’s multi-platform of advertising solutions includes Superpages.com®, Superpages MobileSM, Superpages Mobile SM for BlackBerry®, Switchboard.com®, LocalSearch.com, Verizon® Yellow Pages, Verizon® White Pages, smaller-sized portable Verizon® Yellow Pages Companion Directories, Solutions At Hand™ magazine, Solutions at Home™ magazine, and Solutions on the Move™ and Solutions Direct™ direct mail packages. For more information, visit www.idearc.com.
Idearc Inc. (NYSE: IAR) delivers products on multiple platforms to help consumers find the information they want, wherever they are. Idearc’s multi-platform of advertising solutions includes Superpages.com®, Superpages MobileSM, Superpages Mobile SM for BlackBerry®, Switchboard.com®, LocalSearch.com, Verizon® Yellow Pages, Verizon® White Pages, smaller-sized portable Verizon® Yellow Pages Companion Directories, Solutions At Hand™ magazine, Solutions at Home™ magazine, and Solutions on the Move™ and Solutions Direct™ direct mail packages. For more information, visit www.idearc.com.
IAR-G
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